Mixed Markets Ahead of Tariff Call – Dow up 1%
US stocks experienced a mixed day ahead of key tariff updates and data later this week. The Dow added 1%, the S&P rose 0.55%, while the Nasdaq dropped 0.14%. Treasury yields dropped again after their sharp fall on Friday, the 2-year down 2.9 basis points to 3.883%, and the 10-year down another 4.4 basis points to 4.205%. The dollar crept higher against the majors, with the DXY up 0.16% to 104.17. Oil prices surged higher as supply concerns increased, with President Trump looking to impose more tariffs on Russia and possibly attack Iran. Brent rose 2.71% to $74.73, and WTI gained 3.06% to $71.48 a barrel. Gold again drove higher as haven flows pushed it to new record levels, gaining 1.23% on the day to close at $3,123.33 an ounce.
Tariff “Liberation Day” – How Hard Will They Go
Investors and traders alike are focusing strongly on developments in Washington DC regarding Trump’s reciprocal trade tariffs and how hard the new US administration will go to ‘even things out’. Some estimates in the market suggest that a harder tariff stance could add up to 28% to the average tariff rate, potentially hitting US GDP by as much as 4% and lifting prices by 2.5%, resulting in a $1 trillion drop in US output. These are, of course, huge numbers and based on estimates, but the impact on the US economy – and therefore the global economy – could be substantial. Many investors are hoping for a much softer update on Wednesday, with announcements likely to hit markets after the Asian open, when most products will suffer from lower liquidity. In general, however, most traders expect the updates to trigger even more volatility across markets before the dust settles – and even then, they are not convinced we will have a clear path ahead.
Rate Calls and Data Ahead but Tariffs to Dominate
It is a busy day on the macroeconomic calendar today, which will keep traders focused from a fundamental perspective. However, all market participants are aware of the tariff updates due on Wednesday from President Trump, and most expect their impact to dominate. There is a very strong focus on Australian markets to kick off the day today, with Retail Sales data (exp. +0.3% m/m) due out in the morning session and the Reserve Bank rate call in the afternoon. The RBA rate call is set to dominate sentiment, and they are firmly expected to keep rates on hold after January’s “hawkish cut”, with traders expecting to see moves on the back of the Bank’s updates in the statement and the later press conference. The focus will shift to the EU once the London market opens, with key CPI data due and a scheduled speech from ECB President Christine Lagarde. The New York session sees the first (of many) tier-one US data updates today, with ISM Manufacturing PMI data (exp. 49.5) and the JOLTS Job Openings (exp. 7.9 million) the pick of the bunch. However, once again, most traders expect any tariff talk to outweigh the impact of the data in the short term.
